On Monday, Yahoo announced it was buying Tumblr, the blog network, for $1.1 billion. And then the tweets started, with people declaring that Tumblr founder David Karp was now a billionaire.

The conflation of Tumblr's purchase price with Karp's net worth assumed that Karp got nearly all of the Yahoo payday. And that's simply not how it works for venture-backed startups. Investors like Union Square Ventures and Andreessen Horowitz will share in the take, with Karp getting an estimated $275 million.

(See also: Tumblr's Perverse Lesson: To Get Rich, Don't Make Money)

That's a lot of money, but it won't get him on Forbes' list of the world's billionaires.

You try explaining this to people on Twitter, though.

From high school drop out to billionaire: previously coy Karp cashes in on Tumblr smh.com.au/it-pro/busines…

— Sandra Sully (@Sandra_Sully) May 20, 2013

David Karp (26) now a billionaire after Yahoo! agrees to buy Tumblr news.com.au/technology/yah… Thx #FF @josepheach @sanddragger @conservotop

— Joey Myers Jr. (@JoeyMyersJr) May 20, 2013

Funny how people think that the founder of a venture backed company sold for $1.1b is somehow a billionaire

— David Galbraith (@daveg) May 20, 2013

David Karp--High school drop-out to billionaire stuff.co.nz/technology/dig… I too have no clue why anyone needs to go to school for 12yrs #Tumblr

— Tolstaja Zhirniavka (@tolstunka) May 20, 2013

Sadly, even some respectable publications like Australia's Sydney Morning Herald made the error:

From high school drop-out to tech billionaire: Meet David Karp. ow.ly/lbRIw #Tumblr

— smh.com.au (@smh) May 20, 2013

Other people asserted that Karp was a "high-school dropout." That's actually a debatable point. He left high school to continue his education through home schooling, and never received a formal diploma.

I hate how the media is referring to David Karp as a "high school dropout". Like, yeah he's a dropout but now he's a hot billionaire.

— Trey Amandus Bennett (@trey_amandus) May 20, 2013

Vespa lover, yes. Billionaire, no.

Who knew that newly billionaire @davidkarp likes to ride Vespas? nym.ag/163cMDH #VespaVita

— Vespa USA (@VespaUSA) May 20, 2013

And Business Insider's Henry Blodget tried to resolve the issue with punctuation:

New York tabloids discover @davidkarp, the city's newest ~billionaire tech god read.bi/11RmFms

— Henry Blodget (@hblodget) May 20, 2013

Related stories:

• Who Hates The Yahoo-Tumblr Deal? Tumblrers, That's Who
• Buying Tumblr Will Leave Yahoo With The Same Old Identity Crisis

Photo by Web09

Guest author Derek Brown is a technology executive and analyst who blogs at One Blind Squirrel.

Pinterest is a three-year-old start-up with what is rumored to be no revenue to date. Zero. In fact, by all accounts, it hasn’t even attempted to generate revenue yet. In three years! Hard to fathom in this day and age, isn’t it?

And, yet, some of the sharpest minds in the venture capital community are so confident in Pinterest’s team and business that they recently invested in the company at an eye-popping valuation of $2.5 billion. Yes, billion!

If you were involved in the Internet economy of the late-1990s, as was I, you may be rolling your eyes right about now and muttering to yourself about Pets.com, Kozmo, Webvan, theGlobe.com, govWorks, Boo.com, eToys and all the other so-called-companies that were, for one brief moment in time, valued as if they had discovered the cure to cancer, only to be out of business a few short quarters later. Ahh... the memories.

Assuming that Pinterest’s investors share many of the same recent memories (or, more aptly, nightmares), what could be so compelling about the company and opportunity that would justify their support of such a lofty valuation this time around?

Passion At Scale

In short, I believe it is the economics of passion at scale.

Pinterest, in its own words, is “a tool for collecting and organizing things you love).” (Italics mine.) By pinning images from around the Web to their own board(s) or browsing others’ pinboards for images (which can then be “liked” or “re-pinned” to their own board(s)), users are able to create, manage, share and discover highly personalized image collections that define their passions.

Vintage fashion. Wind surfing. Gourmet cooking. Disneyana. Digital photography. Wedding gowns. Home decor. Camping. Italian design. Rolex watches. Travel planning. Architecture. Mid-century furniture. Urban farming. Knitting. Cross-Fit... The list of people’s passions is literally endless; and, Pinterest helps its users collect, organize and maintain all of them. On their own (or, with the help of the broader community). In granular, image- and/or SKU-specific detail.

Self-identified passionistas on a product-by-product basis — are you kidding? I’m not sure a marketer or merchant could dream of more fertile ground among a set of unknown people, short of seeing a prospective customer standing directly in front of items on a shelf, with cash already in hand. And, I’m not even convinced that would be more compelling on a long-term basis.

What could possibly be better? How about having that level of insight into the interests and intents and aspirations of not hundreds of thousands, but tens of millions, of people per month! According to press reports, Pinterest is already doing just that, hosting roughly 30 million unique monthly visitors who are generating more than 2.5 billion page views, the majority of which are likely coming through little more than domestic word-of-mouth promotion.

Fast forward three years and I think it’s entirely reasonable to assume that Pinterest is successful at growing its user base and traffic flows by 5 times, fueled by existing users continuing to build out their identities, waves of more mainstream domestic users finally catching on and contributions from millions of new pinners (their word, not mine) in overseas markets. That’s a lot of passion under one roof!

Passion Pays

On the business side of the house, passion pays. Extremely well.

Advertising, alone, could generate several hundred million dollars of revenue per year. Let’s say, hypothetically, that Pinterest follows in the footsteps of virtually every sizable media company on the planet, by introducing advertisements of some sort across its pages in the next few years. With marketers across every vertical likely salivating at the prospect of reaching into the company’s massive, impassioned and finely segmentable audience, it seems more than plausible that advertising rates across the company’s site could be at least 50% higher (if not considerably more) than the current industry average. Accordingly, with 12.5 billion page views per month (three years from now) and a site-wide CPM of, say, $4, Pinterest would generate advertising revenue of roughly $50 million per month, or about $600 million per year.

And yet, despite this sum, Pinterests more intriguing revenue opportunity at Pinterest lay in its role as a direct facilitator of online commerce.

Passions, as we all know, cost money — lots of it, over extended periods of time; and, it is money that we are, on some level, actually excited to spend. So, whether it’s a weekend warrior who pins a Burton snowboard, or a hobbyist portrait photographer pinning a Zeiss lens, or a budding interior decorator who pins the perfect accent table on Fab, Pinterest has the potential to become an economic kingmaker when these enthusiasts transition into consumers looking to purchase the goods/services that bring their passions to life.

Projecting Pinterest's Numbers

To appreciate the financial implications of Pinterest’s role in the transaction cycle, think of the service as a massive affiliate that gets paid for delivering customers to online merchants. If just ~3% of its 150 million+ users (three years from now) decide to indulge in their passions by clicking from a "want-to-have" product image on one of their own Pinterest boards to a relevant online merchant, the company could claim a direct role in driving 4.5 million transactions per month. Assuming an average transaction size of $200 (remember, people are buying their passions, not everyday staples), Pinterest’s users would account for ~$900 million worth of monthly purchases. Were the company to receive a 7% affiliate “take”/lead fee/commission on these sales, it would generate transactional revenue of about $60 million per month, or $720 million per year.

As if annual revenue of $1.3 billion (from just two sources) weren’t enough, the company’s margin profile has the potential to be the envy of most. Based on my 15+ years of experience evaluating a wide variety of online marketplace business models, it wouldn’t surprise me if Pinterest were able to sustain gross margins of 90% or more and adjusted EBITDA margins comfortably in excess of 25% (even while continuing to invest heavily in future growth). At these levels, the company would generate adjusted EBITDA of approximately $325 million per year.

Worth It? Or Not?

So... were Pinterest’s investors ultimately wise to value the company at $2.5 billion? No comment.

Will the company generate any annual revenue, let alone $1.3 billion, and adjusted EBITDA of $325 million in a few short years? I don't know.

Will Pinterest eventually be worth $5 million or $50 billion? I can’t wait to find out.

Those purposeful vagaries aside, though, I clearly see the underpinnings of a company with tremendous potential and, if I squint just enough, a business that could be the driver of billions of dollars of passion-fueled online commerce each year — and that’s a position that few companies ever even have the chance to dream about.

Everyone talks about the difficulty and importance of securing funding for your new startup. But that's not the only way to go. Plenty of startups intentionally avoid taking investor cash in an attempt to control the direction of their companies and focusing on product.

So called "Bootstrapping" can be a boon or a bust; you might be missing out on the kind of fast growth a only major cash infusion can provide, but running lean has advantages too.

For insight, we asked seven experienced bootstrappers from the Young Entrepreneur Council (YEC) to share, firsthand, the biggest benefits they've seen from bootstrapping - and what startup founders need to watch out for.

1. You Don't Need Money To Teach About Money

I bootstrapped my most recent startup because I didn't want to lose control of the creative direction before I had proven the concept and sales model. I'm working in an area which has little-to-no track record (financial literacy education for young kids by working with financial institutions as distribution channels), and I wanted to test it first before having to answer to someone who wants to do it his way. An upside to doing it this way is that I am acutely aware of my spending decisions and make them with much thought, but this can also be a downside. There is never a clear "right way," so I continue to bootstrap until my gut tells me otherwise and/or a great opportunity presents itself. - Darrah Brustein, Finance Whiz Kids | Equitable Payments

2. Don't Strap Your Startup Too Tightly

The biggest benefit of bootstrapping for me is that I own 100% of my company, which means I have the freedom to take it any direction I please. There are no outside investors with their own special interests. I am solely responsible for the success or failure of the company. This, in turn, causes some drawbacks as well. Advice and opinions from investors can be very valuable and beneficial to the growth of your company. In addition, their networks can also produce connections that weren't previously available. However, I've learned quickly that there are many successful entrepreneurs who are happily willing to give advice and direction without wanting anything in return. It's up to me to reach out and show genuine interest in their advice and experiences. - Shahzil (Shaz) Amin, Blue Track Media, LLC

3. Trading Growth For The Ability To Pivot Quickly

Contrary to what you might think, being in bootstrap mode actually makes pivoting easier. With a lean operation, the costs for dropping ideas and moving in a new direction are minor, whereas the sunk costs that come with pivoting with money can be nerve-wracking. The biggest drawback is the loss of opportunity for rapid growth. There can be instances where hitting your niche hard and fast is crucial to establishing yourself in your market. A cash infusion at the right time can be what saves your company from the startup graveyard. - Nanxi Liu, Enplug

4. Keep The Profits 

One of the most under-recognized benefits to not bringing in outside funding (in particular, institutional or VC money) is that it means if you create a profitable company, you can actually distribute and enjoy those profits - meaning you can have a positive (and ongoing) outcome outside of a liquidity event. VCs are not interested in receiving dividends - it's just not in their business model. They want cash to sit on the balance sheet, or even better, see it all thrown back into the business (even if there aren't necessarily good places to put it). - Michael Mothner, Wpromote

5. Focus On The Customer

The greatest thing about bootstrapping ColorJar is that our management team gets to do what's best for our customers, rather than our balance sheet. By all means, we're trying to run a strong business - and we've grown quickly - but if we want to take a calculated risk or go the extra mile for a client when it's not in the budget, we can just go for it and act quickly. The drawback of bootstrapping is managing the ebbs and flows of cash flow without a cushion, but banks can help there. Overall, we're a better company with a better process and better service because we've grown at our natural rate and not at the rate required by capital injection. - David Gardner, ColorJar

6. The Ability To Keep A Day Job

I bootstrapped my business for almost seven years while working 80 to 90 hours per week as an investment banker and later a VC. It was a significant personal sacrifice, but I was able to reinvest 100% of the cash flow from Varsity Tutors and a large percentage of my "day job" earnings into growing the business. As a result of that initial sacrifice, money was spent improving every aspect of the company's operations, as opposed to paying myself a salary. Since I had a day job upon which I could rely, it allowed me to be far more aggressive with the investments we made in improving the company. The downside was missing years of social activities. In retrospect, it was certainly worth it. - Chuck Cohn, Varsity Tutors

7. Don't Spend Money, Make Money

In my experience, the biggest benefit of bootstrapping was learning how to offer a great-quality service. Because we weren't funded, we had to make money, and the only way to do that was by offering a great service and hustling. Bootstrapping makes you grow as a person. It's tough, stressful and full of ups and downs. And those things teach you invaluable lessons. - Zach Cutler, Cutler Group
 
The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world's most promising young entrepreneurs. In partnership with Citi, the YEC recently launched #StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons.

As it turns out, the man who wants to build a sovereign ocean community off the coast of California is really down to earth.

Tuesday at South by Southwest (SXSW), serial entrepreneur, venture capitalist and noted libertarian Peter Thiel took the stage to talk about… well, I wasn't really sure. But when the guy who co-founded PayPal, got in on the ground floor of Facebook, offers kids $100,000 to skip college and wants to build a crazy offshore island society talks, I listen. And I'm glad I did. 

Thiel's presentation defined a unique insider's view on the tech industry.

Why Facebook Said "No" To Yahoo's $1 Billion In 2006

It seems unimaginable now, but back in 2006, Yahoo almost bought Facebook. In a meeting to discuss the possibility, Thiel describes how when he, Mark Zuckerberg and board member James Breyer entered the negotiation room, the young(er) Zuckerberg declared that the meeting wouldn't take more than 10 minutes. When Yahoo put a $1 billion offer on the table, Zuckerberg barely humored the idea of selling.

"Full disclosure, I think that both Breyer and myself thought that we should take the money and run," Thiel recalls. "I was a little bit worried about it. The one partial rationalization I was able to come up with for not taking the money was that I looked at the history - two other companies were offered a billion dollars [by Yahoo] and had been turned down: It was eBay and Google."

"The argument that Zuckerberg finally came down on was that there were all these new things that we were going to build at Facebook. [Yahoo] had no definite idea about the future - they did not properly value things that did not yet exist. They were therefore undervaluing the business."

Back then, the founder of Facebook said that he had no idea what he'd do with the money, Thiel recounts how Zuckerberg shrugged and said he'd probably just start another social networking site.

"The companies that are not profitable are actually companies that have a lot of ideas of what to do with money, " Thiel said. "The most successful businesses are the ones that don't sell."

The American Dream Is Dissolving

"We're still maybe in an Indian Summer of indeterminate optimism. In an indeterminate world, all you focus on are processes." According to Thiel, Steve Jobs's calculated multiyear plan after the 2007 crash is the exact flipside of an indeterminate business model - and a explanation for the success Apple still enjoys.

Thiel claims that startup culture and the investment world are locked into a "hermitically sealed loop" - but the era of suspended disbelief, of the strange safety of a bright-yet-amorphous future, can't last. "Indeterminate optimism is unstable" says Thiel. "I want people to at least be aware that this is the [prevailing] religion."

It's a bubble world. It goes without saying that no one wants to talk about bubbles.

The Anti-Tony Stark?

I assumed a man so glutted with cash that he'd dedicate $1.25 million toward seasteading was just another flashy, lucky, walking embodiment of the Gatsbian dream. But Thiel is a cerebral entrepreneur steeped in Continental philosophy and urban planning practicalities - not the VC lexicon of buzzwords and bullshit. With an even meter to his speech and an uncanny way of flitting from history to philosophy, he may have just called the most gracefully executed bullshit on the tech industry… ever.

His talk itself proved to me that no, success isn't just about luck - not all of the time, anyway. Plucking historical examples from The Reber Plan to one of No Country For Old Men's creepiest scenes (the one when sociopath Javier Bardem decides if he'll kill a small-town Texan with a coin toss) to pop-finance read A Random Walk Down Wall Street, Thiel is a fascinating foil to the Tony Starks - and the Elon Musks - of the entrepreneurial world.

And yet his dreams are as big as Musk's - and I'd bet they're crazy enough to work, just the same.

Guest author John Fearon is CEO of Dropmyemail.com, which backs up emails in the cloud.

If you have a startup, ignore the business plan, financial projections, valuations and statistics for now.

Instead, look at yourself.

Would investors spend $1 million to have coffee, much less champagne, with you?

Let’s face it. The entrepreneurial path is a lonely, hardscrabble one that often ends in failure. Statistic Brain estimates that half of all startups fail by the fourth year. So, it pays to understand what savvy investors are thinking when you put your hand out.

It's All About You

There are exceptions, but among the investors who can do you the most good, money is flowing to the people behind startups, not so much to the idea behind them.

Being the person that investors believe in is the surest way to secure seed funding.

As the movie “The Social Network” and Facebook’s About Us page attest, Mark Zuckerberg got his initial capital from his then-best friend, Eduardo Saverin to start Facebook. At that point, Saverin may have believed in the business but he certainly believed in Zuckerberg.

Even venture capitalists look past PowerPoint presentations and spreadsheets to see the “people equity.” Felix Salmon, a financial blogger at Reuters, explains it this way in his post Buying Equity in People:

“Venture capitalists are increasingly investing in a startup’s management team rather than in its business model or underlying idea. Find the entrepreneur and invest in the individual directly, thereby guaranteeing that you’ll have a stake in their success if and when they finally hit it rich on their fifth or sixth attempt.”

To make a mark, startups usually have to raise up to $1 million in the seed round. This benchmark may vary from business to business, particularly if an idea involves a physical product.

Investing In The Entrepreneur, Not The Idea

The initial sums raised are usually invested in the entrepreneur, not the business. And with six zeros in the bank, there is sufficient cash to scale up (hiring of new staff, improving equipment, purchasing of advertising, etc).

The charm offensive doesn’t end then, either. Once funding is in hand, a founder has to inspire all the other people that he or she needs in order to make the idea real. To get through the thin to reach the thick, entrepreneurs have to be the rock to which friends, family, staff and investors alike hold onto.

Is this you? Great! If not, you need to find a magnetic personality to help you do the convincing.

Most entrepreneurs start the same way, borrowing money and looking for investments at every turn. Successful would-be magnates don’t depend on their idea so much as on their ability sell people on their idea.

A subtle distinction, indeed, but an increasingly important one.

Image courtesy of Shutterstock.

Instagram and Twitter have had a falling out, as ReadWrite's Jon Mitchell reported recently. In case you missed the latest Silicon Valley kerfuffle, the gist is that Instagram won’t let you view your photos on Twitter anymore and instead now forces you to leave Twitter and go look at them on Instagram. Instagram says Twitter started it. Twitter says Instagram started it.

Michael Arrington blasts them both, saying they’re putting themselves ahead of their members. True enough, but Arrington misses the larger point.

The real problem is not that the people running these companies are greedy, selfish and childish (though they are). The real problem is that they are behaving in a completely rational way given the Web 2.0 business model, which ultimately makes this kind of exploitation inevitable.

Companies like Twitter and Instagram (and Facebook, which owns Instagram) are set up in such a way that their interests have never been aligned with the interest of their users, but in fact are in complete opposition to them.

Blame The Business Model

The only way these companies can succeed financially is by tricking members and forcing them into walled gardens. Think of it this way - there’s a reason that they don't hold a circus out in the open, and instead put it under a tent - and it’s not to keep you dry in case of rain.

Sure, some companies start out pretending to be all open and inclusive. That’s only because they need to ride on the backs of other services in order to attain sufficient scale. Once they’re big enough, they begin cutting off those connections, rounding up users, claiming ownership of your data and so on.

Twitter grew huge thanks to the work of lots of small partners who built Twitter add-ons. But once Twitter needed to make money, the partners got it in the neck. You might call this evil, but it is what Twitter needed to do.

Of course this stinks for users. But it’s naive to expect these companies to do anything else.

Arrington lashes into Instagram CEO Kevin Systrom, but if you’re Systrom, you’ve got to satisfy different stakeholders with divergent interests. You have investors, who want the biggest possible return in the shortest possible time. And you have users, who want as many features and as much interoperability as possible, at zero cost.

Which group do you think gets priority - the one that gave you millions of dollars to build your business, or the one that wants everything but doesn’t want to pay?

Arrington says screwing users is short-sighted, and that a smart company would “treat users with respect and make sure that your product does everything it can to delight and amaze.” A company that did this would build “a hundred year brand,” he says.

I’m sure he means this, so apparently there is at least one investor in Silicon Valley who believes that outfits like Instagram might be around in 100 years because our cyborg descendants will be as fascinated by old-fashioned photo filters as we are.

All the other venture capitalists, however, seem to operate under the (far more realistic) belief that this could all be over at any minute and you should grab as much as you can get while you still can. These are not long-distance thinkers. Heck, Facebook took heat for making its investors wait eight whole years to cash out in an IPO.

Wishful, Magical Thinking 

As for this pipe dream about a magical utopian Web where serivces all interoperate and everything is wonderfully mashed-up and interoperable, well, that was a nice idea that some people had in the early days of Web 2.0.

But anyone who thought about it could see that this was never going to happen, especially if we also insisted on getting everything free. You can have one or the other, but you can’t have both.

The dream was rubbish, a big lie that was sold to us along with the one about “changing the world,” and the one about “a world that is more open and connected is a better world.”

That last one comes from Mark Zuckerberg. Yes, the same Mark Zuckerberg whose company doesn’t let users control their own data, and whose company owns Instagram, which just cut off connections to Twitter. The one that from the beginning has been a roach motel, a place where data goes in and doesn’t come out.

Then Again, We Could Just Pay

One solution - of course - would be for us to pay for these services, so that companies providing them didn’t need to screw us to stay alive.

As Jon Mitchell has pointed out, App.net is trying something like that.

But let’s be honest. We’ve all been trained to expect stuff free. And most of these services are not compelling enough that many people would pay for them. Sure, they’re fun, but if Facebook suddenly demanded $10 a month, how many of its billion users would still be around six months later? And that’s an app that most of us feel we can’t live without. The others would be gone in six minutes.

I know it's fun to get angry at tech companies when they screw us over. But whose fault is it, really, when we end up getting tricked and exploited and treated like crap by companies we thought were our friends? Look in the mirror.

Here’s some stunning, Earth-shattering news: You know all those hundreds of incredibly stupid startups that have been raising seed money in Silicon Valley despite the fact that the people running those startups have no experience doing anything, ever, and have no idea at all how to generate revenue (let alone profit) with their lousy ideas, because, in fact, there is no way to make money with their lousy ideas, because in fact their ideas are lousy?

Well, nobody wants to give those dopes any more money. So now they're going to go out of business.

I know. Shocking.

And the dopey angel investors who wrote the checks for those startups are going to lose their money. Because they can't foist their bad investments onto the venture capitalists who occupy the next rung up on the food chain.

But who didn’t see this coming? For the past few years we’ve had people calling themselves “investors,” who have no experience investing, swanning around the Valley, slinging money at people calling themselves “entrepreneurs” who have never held an actual job, let alone run a company.

How could this have ended in anything but a train wreck?

We're Shocked -- Shocked! -- By All Of This

The sweet irony is watching the buffoons who have been cheering on this clown show and raving about "traction" and "disruption" and "pivots" now reporting on the mess that they helped create.

PandoDaily is reporting on the “Series A crunch” in which companies that have raised seed funding now are discovering (presumably to their utter amazement) that actual venture capitalists aren’t as stupid as the angels who gave them their first bag of cash, and, given the opportunity to invest in their pointless companies, the VCs have decided to politely decline. Thus, now we are facing a “nuclear winter" (!) where thousands of companies will go out of business.

TechCrunch says they knew all about this a year ago and, by the way, it's good for all these companies to die because this is the natural ebb and flow. To be sure, when everybody could raise money, even with stupid ideas, well, that was a good thing too, and we were all supposed to cheer for those idiots because that’s our job as bloggers, to cheer on and support those heroic entrepreneurs, but now that all those heroic entrepreneurs are going broke, well, that is a good thing too, because, well, right.

And remember when there supposedly was no bubble? How many times did the tech blogs go out of their way to insist that all of this over-investing and overpaying made perfect sense?

Then Facebook went splat and Zynga went splat and Groupon went splat and now VCs are pulling back and nobody can raise money and all those people who claimed there was no bubble are reporting that guess what, something like 2,000 lame-ass companies are going to flame out, but this just means that things are coming back to normal and isn’t it great that the frothy times are over?

But if that's the case, doesn't it mean that we were in fact in a bubble back when all those blogs were saying there was no bubble? Apparently the answer is, No, that wasn't a bubble. That was just frothy.

I’m sorry but the whole thing is hilarious. Or sad. I can’t decide which.

A Confederacy of Dunces

This is what the Valley has become these past few years:

It’s wannabe journalists writing about wannabe investors giving money to wannabe entrepreneurs and everyone in the circle jerk believing that the whole thing makes perfect sense because, trust us. This. Will. Be. Huge. Oh, and by the way, bloggers aren't just bloggers anymore -- they're now entrepreneurs too. Because blogs are being funded by venture capitalists. Get it?

It’s Robert Scoble riding on the StartupBus to SXSW, gushing about some kids from Stanford -- Stanford! --  who take three whole days to build an awesome company called Gourmair that solves a huge world-changing problem: how to find gourmet food and have it shipped across the country to your doorstep. Why? Because “there isn’t a centralized place to discover, discuss, rate or buy these kinds of gourmet meals.” And because, "According to our market research, the top vendor in the space does more than $450 million in annual sales." Wow.

It’s John Doerr of Kleiner Perkins, age 60, trying to be hip by wearing a hoodie and T-shirt and sneakers, and announcing a fund for social apps. So cool!

It’s Ben Parr of Mashable, whose background includes blogging and … blogging, announcing that he too is now a venture capitalist and is creating a “celebrity fund” that has a super cool name — #DominateFund. What kind of guy is Ben Parr? The kind of guy who makes up a name like #DominateFund. And who announces a fund before he’s actually raised the money. And who launches a fund focused on consumer Internet just when all the smart money is moving away from the consumer Internet and rushing toward the enterprise, and when VCs are closing the door on the deals that angels bring them. Enough said.

Well, now maybe the madness is coming to an end. VCs are shying away from bullshit consumer ideas, and the enterprise is cool again.

What Happens Now?

Maybe the Valley will get back to what it once was all about — making actual technology products.

The great lie of these last few years is that anyone can be a tech entrepreneur. You don't need to know electrical engineering or computer science. You don't need to know anything about business. You just need a positive outlook and an ability to speak confidently while saying things that make little or no sense.

What really offends is that smart young people have been conned into thinking that starting a company is akin to buying a lottery ticket or rolling dice at Las Vegas -- the odds are long but you never know, you might get lucky and strike it rich. So make something up, throw it out there, and see what happens. "Spray and pray," it's called.

Meanwhile our country is facing a crisis because we have a shortage of students in STEM -- science, technology, engineering and math. Every big company in Silicon Valley is starved for talent. And there is an entire generation of young people who, instead of studying those hard subjects, would rather slap together the fourteenth version of a peer-to-peer car sharing service or alternative taxi service. Because it's easy and you might get rich quick.

So maybe now all those people who have been playing “entrepreneur” will go get actual jobs making actual products and gain some actual experience. Maybe they'll go back to university and study medicine, or engineering. Maybe they will realize that not everyone should be an entrepreneur - the Valley produces maybe 10 good companies a year - and that being an employee at a good company adds value too. 

In my dreams I imagine them leaving the Valley and going off to accomplish something meaningful. Using those brains to do medical research, develop new drugs or eradicate poverty. I imagine them teaching in public schools, providing health care to poor kids. Joining Tesla or SpaceX. Pushing AI a few steps forward. Solving big problems, the kind that can't get solved in three days on a StartupBus.

They might not get rich, but at least they'd be doing something useful. 

So who knows. Maybe this will happen. Maybe these young people will realize they have only one life and that they should do something valuable with the brief time they have.

Maybe the angel investors and cheerleaders will feel guilty for having wasted so many people's time and energy and resources that could have been used for something good. Maybe they'll realize that easy money isn't the solution - it's part of the problem.

Maybe all the angels will simply get sufficiently butt-hurt on these lousy deals there won’t be enough of them around to mislead thousands of other kids into creating another one of these seed-round bubbles, or whatever you want to call what’s happened. Maybe we'll all buckle down and start trying to solve big, important problems.

Yeah. I know. Not gonna happen. Maybe once we were that kind of country. But that's not who we are anymore. Oh well. But as Papa Hemingway once wrote: Isn’t it pretty to think so?

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